Wells Fargo among the companies setting racial hiring quotas

After decades of failed diversity pledges and good-faith promises to hire more minorities, U.S. companies are taking a more aggressive approach. For the first time, some of the biggest corporations are setting concrete racial quotas.

As many as a half-dozen companies have said they’ve adopted workforce quotas in recent months. These include Wells Fargo & Co., the nation’s third-biggest bank, which said it will increase Black leadership to 12%. The bank last week settled federal allegations of hiring bias.

Meanwhile, fashion house Ralph Lauren Corp. said it aims to make 20% of its global leaders people of color, including Black, Asian and Latino workers. Delta Air Lines Inc., where 7% of the top 100 in the organization are Black, will double the percentage of Black officers and directors by 2025.

The moves, a response to this summer’s nationwide protests and employee revolts after the police killing of George Floyd, mark a dramatic shift in thinking by executives in industries ranging from banking to cosmetics to fashion. They amount to a blunt admission that the existing diversity playbook doesn’t work and has failed people of color — especially Black employees.

“Companies that write affirmative action plans, which set goals, see more progress toward diversity than companies that don't,” said Frank Dobbin, a professor of social sciences at Harvard University.

One of the most comprehensive commitments was made by beauty giant Estee Lauder Cos. after an uprising from its own staff. In June, a group of more than 100 employees sent a letter to the chairman, family heir William Lauder, voicing their concerns about race relations at the company.

In a memo days later, Estee Lauderpromised that within the next five years it will reach population parity of Black employees across all levels of the organization.This was designed to make it transparent if the company was inflating its numbers with only lower-level hires. If all goes according to plan, one in every seven or eight workers, up and down the hierarchy, will be Black.

Estee Lauder’s senior staff didn’t think sustained results were possible without setting hard targets, according to a person familiar with their thinking. Management is reviewing personnel practices throughout the company, including succession planning and how they come up with candidate pools, and will be providing regular internal progress reports, the person said. The company declined to comment.

Many other companies, including Alphabet Inc. and JPMorgan Chase & Co., promised to boost Black hiring. All these targets are little more than good-faith policies with no consequences for failing to meet them.

“You're going to see a lot of focus, even now, in internal movement and internal talent spotting,” said Keyra Lynn Johnson, Delta’s top diversity executive.

Hiring of women on corporate boards was also bogged down until companies were forced to respond to pressure from large institutional shareholders and legislative mandates. California adopted a law setting targets for female representation on boards of companies based in the state; this week the state passed a similar mandate for racial diversity. Those that don't comply face fines. Big shareholders have also started voting against electing boards that lacked female representation.

For decades, many of America’s biggest employers have publicly pledged their commitment to diversity. They spent billions of dollars recruiting people of color, hired diversity officers and ran ads touting their dedication to inclusivity.

The result? Black people, who make up 13.4% of the U.S. population, now account for just 3.2% of executive or senior leadership roles, according to a 2019 study of full-time white-collar workers by the Center for Talent Innovation. The efforts have proven so ineffective that in some cases the progress of recent years has reversed, with the number of Black executives in the banking industry declining.

But the use of quotas, a tactic with a mixed record, has drawn a good deal of criticism: They have been used to both limit employment of non-white workers or ethnic minorities and to encourage it. Their use also can invite legal challenges and the Supreme Court has taken a dim view of them when used by public employers, though it has allowed them by the companies.

Government hiring quotas were instituted in the 1960s after a series of executive orders were issued requiring federal contractors to take “affirmative action” to ensure equal employment opportunities. Yet the gains were modest at best, with the share of Black employees rising by 1% within the first five years after adoption, according to a 2017 study published in the American Economic Journal. After official hiring policies were dropped, employment gains continued at a similar rate.

In the private sector, in the absence of strict targets, signs of a breakthrough are even harder to find. Black men in corporate management, for instance, have barely gained ground since 1985, according to Harvard’s Dobbin. Even when companies say they are working toward diversifying their workforces, they set vague objectives, giving management nothing tangible to shoot for.

“In many firms,” Dobbin said, “managers don’t often know what the goals are.”

Now, at least, some of them will know.

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